Economy, Technology Combine to Make Cogeneration a Viable Option for Building Owners Today
August 15, 2004

By Staff
Appeared in Real Estate Weekly

Advances in technology combined with rising energy costs have made the use of cogeneration an economically viable option for an increasing number of New York City building owners, improving utility reliability while reducing overall utility costs.

Cogeneration by definition is the simultaneous generation of electricity and useful heat in a building or industrial services facility. Historically, it has been used to generate energy for large-scale applications -- industrial complexes, college campuses, hospitals and in campus-like settings -- where there is considerable electricity usage and a need for steam. Today’s changing economy and technology advances is now making it more of a viable alternative solution for medium to large office and residential buildings as well. An example of a small-scale cogeneration application might be its use to generate electricity onsite in a building to supplement utility-supplied power while also providing hot water for the building’s domestic use.

Recent advances have made the use of cogeneration today much more attractive for smaller users. Technology has advanced to a point where smaller unit sizes are now available. The scale of the necessary equipment has been reduced to a point where units can be placed in buildings in smaller spaces. The economics have changed as well. Along with smaller packaged units have come increased equipment production and lower prices.

As a result, it is now feasible to design and install a cogeneration system in a medium-to-large-size office, commercial or residential application. In fact, it is now much more of a technology that will continue to improve as new equipment is developed specifically for high-rise residential and commercial applications.

Even with lower prices and better equipment, it is still necessary for an owner to undertake a feasibility study to conclusively determine whether cogeneration is the best option for their particular building. Typically, the technology is most appropriate when the user has a continuing demand for the waste heat the system captures– for spaces such as data centers, trading floors and other similar locations, as well as residential towers. Under this scenario, the cost savings can easily be measured as lower utility costs can directly result in an improved bottom line.

Conversely, cogeneration is often inappropriate for those building types in which the off-peak use of heat-energy is sporadic or low.

In conducting a feasibility study, a cogeneration expert will look at such factors as space allocation, electric utility consumption and peak demand, utility rates for fuel and electricity, and the intended use for the heat or steam that is generated. Other issues also come into play, including environmental and local permitting requirements.

As technology progresses, costs will continue to come down, making cogeneration even more enticing to building owners. Two recent studies done by Syska Hennessy Group, a leading national energy services consulting firm, have shown that the benefits are significant for building owners looking for backup power as well as utility cost savings. One analysis was performed for a large Manhattan insurance company with a 28-story building that houses office and commercial tenants. The second study was for a mixed-use office building with more than one million square feet of space.

The results demonstrated that cogeneration could save millions of dollars over a 10-15 year period. The studies were done where cogeneration was not the only consideration, but back-up power for reliability played a key role as well. Owners are also looking at cogeneration as a means to increase the reliability of their electricity supply, especially after the blackout of August 2003. Currently, many companies that need highly-reliable power are making considerable investments in emergency and back-up power generation. Depending on the size of a building’s cogeneration equipment, the plant could provide part or full electricity requirements for a building for an extended period of time in the event of a power interruption.

Given the uncertainty over the rising cost of energy, it makes good sense for building owners to explore every means possible to lower costs while increasing reliability. A feasibility study will quickly determine if cogeneration can provide the solution for a particular building’s energy needs.